In another fiscal jolt, Orange County officials disclosed Saturday that the county treasurer’s office had wrongly diverted about $85 million into two special accounts, shortchanging scores of cities, school boards and special districts of interest payments.
Board of Supervisors Chairman Gaddi H. Vasquez said it was unknown why the money was diverted and that all records were being turned over to the county district attorney and the U.S. Securities and Exchange Commission, both of which are investigating the county’s financial collapse last month.
“We haven’t looked at what laws have been broken, but it appears that government records were falsified,” said Jim Mercer, an attorney working for the county. “All we know is that money that normally would have been allocated to pool participants was instead kept in an account at the treasurer’s office,” Mercer said.
County officials and their accountants said Saturday they had found no evidence of embezzlement, or that the $85 million diverted from investors since August 1993 was intended to help with the county’s worsening cash-flow crisis. Accountants said another $15 million also may have been wrongly diverted.
The money is owed to the 187 public agencies that invested in the county pool managed by former county treasurer Robert L. Citron, who resigned two days before the county filed for bankruptcy Dec. 6.
None of the improperly allocated interest has been spent, officials said, and clear records now exist that will enable the money to be returned to investors. Pool participants will likely be credited with 1 percent to 2 percent more interest than they were given for the past 18 months.
The financial discrepancies came to light after an audit by the accounting firm of Arthur Andersen & Co., which discovered Friday that the county’s so-called “economic uncertainty” fund received more interest than other participants in a “commingled” investment pool beginning in the summer of 1993. They also found another fund, known only as “9JJ,” that was opened in July 1994 and appears to have earned higher yields than the rest of the pool.